Bank Station capacity upgrade, 2015

This case study explains how London Underground used a new approach to accessing supply chain expertise called its Innovative Contractor Engagement (ICE) approach to bring about £63m of business case improvements on the Bank Station Capacity Upgrade project scheme.

A train pulls into Bank Station. LUL's Innovative Contractor Engagement (ICE) process helped bring about £63m of business case improvements to the capacity upgrade of Bank Station

Executive summary

London Underground Limited (LUL) has developed a new approach to accessing supply chain expertise, using its Innovative Contractor Engagement (ICE) process. This new approach brings together key members of the specialist supply chain early in the procurement process in a way that builds trust, accesses supply chain expertise and, thereby, enables a scheme’s business case to be optimised. On LUL’s Bank Station Capacity Upgrade, this improved the business case on the scheme by £63m.

Introduction

To support its network capacity upgrade, LUL is undertaking a major capital project to expand Bank underground station. This £563m scheme will increase the number of passengers that can travel through the station at peak times, alleviating the impact of forecast passenger growth at Bank. The work to enlarge the station consists of major civil engineering, including moving the Southbound Northern Line tunnel approximately 20m westward. The project will be delivered under the heart of the City of London, one of the most expensive areas of real estate in the world, whilst the station remains operational. This involves specialist tunnelling, civil engineering, high voltage power engineering, communications systems, lift and escalator works, as well as building and M&E work.

LUL’s main objective in delivering such schemes is to maximise the business case value in scoping, design and delivery of the project.

Based on consultation with its supply chain, including specialist subcontractors, LUL identified that a different approach to early contractor involvement (ECI) was required to gain access to the highest quality design and engineering skills.

The purpose of this case study is to outline the benefit of early contractor involvement under the Innovative Contractor Engagement (ICE) methodology developed by LUL.

What we did

A two-stage approach is conventionally adopted to obtain early contractor involvement in large single project infrastructure schemes. The initial stage involves procuring a contractor to work alongside the project team during feasibility and concept design stages, to provide constructability and programme advice. The output of this stage is a compliant scheme design, which is then used as the basis for the second stage, a tender to the market for the substantive works. The contractor involved in the initial stage is not necessarily the same party, which secures the substantive works.

This approach gives rise to a number of problems, namely:

The contractor providing input into the first stage is incentivised to hold back on the ideas that can deliver major savings, as these provide commercial advantage for their bid for the substantive stage.

Some contractors do not trust clients – i.e. they fear major savings ideas are taken and added to the compliant design for all contractors to bid against in the second stage.

Clients evaluate bids for the substantive works around the compliant scheme. The result is that contractors are reluctant to invest time and effort in bidding detailed cost saving ideas, as they may deviate from the compliant scheme.

Recognising these problems, and again based on supply chain feedback, LUL developed and implemented its ICE process for the procurement phase.

How we did it

Under the ICE process, the procurement phase is divided into three phases:

Prequalification of teams follows a conventional process. The next confidential engagement stage is where a different approach is adopted, in order to overcome the problems of conventional ECI. During this six month stage, bidding teams review the scheme information, including business case, and work-up their proposals to improve this business case. LU then engaged with each bidder to enable them to validate that their ideas work within LU’s scheme constraints. Ideas are not shared across bidders. Validated ideas are then taken forward into the tender at Stage 3. This tender stage results in an agreed target price contract.

Bidder teams are paid for participating in the confidential engagement stage and unsuccessful bidders are paid for the subsequent use of their innovative ideas, which are complementary to those of the winning bidder. LUL enters into a confidentiality agreement with each bidding team to formalise the period of confidential engagement.

Benefits and Outcomes

This approach overcomes the problems of the conventional method, by providing a secure environment for confidential engagement, enabling the development of major cost savings and thereby retaining their commercial edge. Paying losing bidders for their ideas (if used) provides incentive to release them for use in the final scheme.

The result is a competition focussed on ideas for delivering major efficiencies, rather than one based on the compliant, but not necessarily the most efficient, scheme design. It also helps build trust between client and supply chain, reducing miscommunications and misunderstandings at an early stage.

For Bank, this ICE process resulted in a £62m improvement in the business case and the selection of a delivery supply chain able to support obtaining TWA approval, with a developed outline design and delivery methodology.

Further Information

What is the Alliancing Code of Practice?

The Alliancing Code of Practice outlines the information needed at different stages within an alliance. It provides accessible and valuable support to those embarking on an alliance journey and those already developing an alliance. It draws on experience from many organisations; clients, delivery teams, consultants and academics to highlight:

which aspects of alliance set up are most important,

when they are most applicable,

the building blocks that need to be in place to ensure the effective development of alliances.